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Federal Court Judge Affirms a $3.3 Million FINRA Arbitration Award Against Morgan Stanley Including Record-Setting $3 Million in Sanctions

Posted on Tuesday, April 21st, 2020 at 4:43 pm    

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In April 2020, a federal judge in Florida tossed Morgan Stanley’s Motion to Vacate a $3.3 million FINRA arbitration Award won by Jeffrey Erez, Esq. in July 2019 on behalf of its clients due to Puerto Rico bond and fund losses. The FINRA award included $3 million in sanctions for Morgan Stanley’s failure to comply with discovery rulings.

Morgan Stanley unsuccessfully challenged the award by arguing that two of the three arbitrators made inadequate disclosures and that that the $3 million in sanctions exceeded the arbitartors’ authority. According to the Order, the court concluded that Morgan Stanley failed to meet its burden to establish the existence of any one of the limited statutory grounds to vacate the arbitration award.

In July 2019, a former client of Morgan Stanley won an award in a FINRA arbitration for $3.3 million for losses sustained primarily from Puerto Rico bond and fund investments. The award included $261,420.63 in compensatory damages, $3 million in monetary sanctions, plus interest in the sum of .1% per annum from March 31, 2013, through and including August 30, 2014. According to the order, “The Panel found that Petitioners suffered ‘extreme prejudice’ from MSSB’s failure to provide documents ‘which the Panel deemed were highly relevant to the dispute in question’.”

The causes of action included breach of fiduciary duty; negligence; negligent supervision; fraud; breach of contract; breach of contract – third party beneficiary; violation of Sections 10(b) of the Securities Exchange Act and Rule 10b-5 of the Securities and Exchange Commission; violation of the Florida Securities and Investor Protection Act; and violation of the Puerto Rico Uniform Securities Act. The causes of action are related to the claimants’ investments in Puerto Rico bonds and closed-end bond funds, as well as the use of a securities- backed loan. The FINRA arbitration hearing was conducted in Miami, Florida.

During the course of the hearing, FINRA arbitrators found that Morgan Stanley concealed evidence. According to the Award, “The Panel took note of the extreme prejudice Respondent’s failure of compliance caused Claimants’ counsel in preparing their case and asserting their claims without the withheld documents which the Panel deemed were highly relevant to the dispute in question, the central figure of which was the terminated employee whose related documents were being withheld.”

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.